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U.S. stock index futures fell sharply lower on Friday as geopolitical conflicts between the United States and Russia as well as with Turkey dented investor’s confidence. Moreover, prolonged trade war fears with China continue to dampen market sentiments.

On Aug 8, the U.S. government imposed fresh sanctions against Russia related to alleged poisoning a former British spy and his daughter in the UK. On Aug 10, Russian Prime Minister Dmitry Medvedev has threatened the Trump administration stating that Russia will consider U.S. sanctions as a declaration of economic war.

Meanwhile, political diplomacy with Turkey took a negative turn after Turkey refused to release Andrew Brunson, an American evangelical pastor that was detained in 2016, on charge of trying to overthrown the Erdogan regime. Turkey is also facing severe economic crisis. Consequently, its currency Lira fell 14% against the U.S. dollar on Friday forcing investors to opt for safe assets like Japanese Yen or U.S. government bond.

On the trade war front, the Chinese government has warned the United States about a "protracted" trade war if the Trump administration continues to impose tariffs on Chinese goods.

Wall Street closed mostly lower on Thursday as lingering trade related conflicts took a toll on investors’ risk appetite. Both the Dow and S&P 500 continue their losing streak. However, Nasdaq Composite was up marginally.

The Dow Jones Industrial Average (DJI) closed at 25,509.23, declining 0.3%. The S&P 500 Index (INX) was down 0.1% to close at 2,853.58. However, the Nasdaq Composite Index (IXIC) closed at 7,891.78, gaining 3.46 points. A total of 5.9 billion shares were traded on Thursday, lower than the last 20-session average of 6.3 billion shares. Decliners outnumbered advancers on the NYSE by 1.04-to-1 ratio. On the Nasdaq, advancers had an edge over decliners by 1.10-to-1 ratio. The CBOE VIX increased 3.9% to close at 11.27.

The Dow ended in negative territory with 16 components of the 30-stock blue-chip index closed in the red, while other 14 finished in the green. The tech-heavy Nasdaq Composite has gained eight days in a row, its longest winning run since October 2017.

The S&P 500’s decline was led by a 0.9% decrease in Energy Select Sector SPDR (XLE) and 0.6% loss of both Financials Select Sector SPDR (XLF) and Industrials Select Sector SPDR (XLI). Notably, five out of 11 sectors of the benchmark index closed in the red while six ended in the green.

On Aug 8, the Chinese Ministry of Commerce announced a 25% tariff on $16 billion worth of U.S. goods. China has revealed a list of 333 U.S. goods mainly from industries like large passenger cars and motorcycles, various types of fuels as well as fiber optical cables, on which fresh tariffs will be implemented.

On Aug 7, the U.S. Trade Representative's office published a list of 279 Chinese import product lines, which will be subject of 25% tariffs worth $16 billion and will be implemented on Aug 23.

This is the second part of the first phase of $50 billion tariffs that the Trump administration has decided to impose on Chinese imports. Notably, China has already imposed 25% tariffs on $34 billion U.S. imports.

The Chinese government has warned the United States about a "protracted" trade war matching step-by-step if the Trump administration continues to impose tariffs on Chinese goods.

U.S. corporates have posted robust earnings results for the second quarter of 2018. So far, 452 S&P 500 members have reported their quarterly results. Total earnings of these companies are up 25.5% on 10.2% higher revenues. For the S&P 500 index as a whole, total second-quarter earnings are expected to be up 24.7% from the same period last year on 9.5% higher revenues.

If the current earnings expectation of second-quarter for the S&P 500 index as a whole materializes, it will be the highest quarterly growth pace in almost 8 years, exceeding the first-quarter 2018’s earnings growth rate of 24.6%.

The Labor Department reported that initial jobless claims dropped 6,000 to a seasonally adjusted 213,000 for the week ended Aug 4, lower than the consensus estimate of 218,000. Data for the week ended Jul 28, was revised to show 1,000 more applications for state unemployment benefits.

The Labor Department also reported that producer price index (PPI) for the month of July remains unchanged with June. This happened for the first time in seven months and was below the consensus estimate of an increase of 0.2%. Modest increase in cost of goods was offset by a decline in cost of services. In the 12 months through July, the PPI grew 3.3%, slight below 3.4% growth rate in June.

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